Protecting taxpayers' money: Commission proposes to strengthen use of criminal law against fraudsters

Misuse of EU funds for criminal purposes puts the EU's objectives of generating jobs and growth and improving living conditions at stake. With public finances under pressure throughout the EU, every euro counts. The European Commission, has therefore proposed new rules today to fight fraud against the EU budget by means of criminal law to better safeguard taxpayers' money. The Directive creates a more harmonised framework for prosecuting and punishing crimes involving the EU budget so that criminals no longer exploit differences between national legal systems. The Directive provides for common definitions of offences against the EU budget and for minimum sanctions, including imprisonment in serious cases, and for a common level playing field for periods within which it is possible to investigate and prosecute offences (ie. statutes of limitation). This will help to deter fraudsters, provide for more effective legal action at national level and make it easier to recover lost funds.

Vice-President Viviane Reding, the EU's Justice Commissioner said: "EU money must not be pocketed by criminals. It is crucial to put in place criminal law rules of the highest standard, in order to protect our taxpayers' money. Our aim is clear: to ensure that EU budget fraud does not go unpunished, in turn saving taxpayers' money. Today's proposal will help overcome the current patchwork of EU criminal law provisions, where some Member States punish one crime with imprisonment whilst others take no action."

Algirdas Šemeta, Commissioner responsible for anti-fraud, said: “The current approach to protecting EU funds across Europe is patchy at best. Fraudsters should not escape prosecution and sanctions simply because of their geographical location. European taxpayers' money must be robustly protected in every Member State. Today's proposal is an important step in that direction."

Currently, there is a wide variety of approaches to the protection of EU funds across Member States. The interpretation of what constitutes fraud to the EU budget differs from one country to another, as do the penalties. To give one example: the level of sanctions for fraud varies across the European Union from no mandatory sentence for fraud to 12 years imprisonment. Equally periods within which it is possible to investigate and prosecute offences vary widely, ranging from 1 to 12 years.

To address this problem, today's proposal defines offences such as fraud, or other fraud related crimes such as corruption, the misappropriation of funds, money laundering or obstruction of public procurement procedures to the detriment of the EU budget. These common definitions will help to ensure equal application by judicial authorities across the EU, whereas the conviction rate for cases of fraud detected in Member States when executing the EU budget ranges from 14% to 80% (with an EU average of 41%) depending on the Member State concerned.

Today's Commission proposal provides for Member States to impose a minimum sanction of six months' imprisonment for serious cases. In order to help the recovery of funds it provides for confiscation of the proceeds of these crimes.

Background

Losses to the EU budget due to illegal activities are a cause of concern. More than 90% of the EU budget is managed nationally. In 2010, there were a total of 600 suspected fraud cases involving EU expenditure and revenue. Member States reported suspected cases of fraud to a level of €600 million.

These were cases where applicants for EU funds provide false information to receive funding in for example the field of agriculture of regional development or where national officials accept money in return for awarding a public contract, in breach of procurement rules.